HELOC for rental property. Please help

[Joseph Dike]

Hello all,

I hope I’m posting this in the right section.

I found BP a few months ago and cant stop reading. So much experience and knowledge on here, just glad I found it.

Now for the story.

I bought my primary residence about 3 years ago. To date I have about 60k in equity I am able to pull out of it. 20yr draw followed by a 20yr repayment. I am contemplating purchasing a fourplex for 280k with 25% down, so I would be coming out of pocket 10k as well. Cash flow is 2400$/mon as of now (600$/unit), each unit is 2bd 1ba, but could increase maybe another 100$/unit. Only water (100$/mon) is landlords responsibility, everything else by tenets. PITI is about 1630$/mon, and I figured another 500$/mon for vac, repairs, and capex. There is also a 4 car garage that that landlord uses for storage and tenets do not currently use, so could provide a little extra.

This would be my first rental property. Does this make sense. Do the numbers make it an ok deal? Any advice is welcome. Thank you

Joey

[John Warren]

@Joseph Dike on the surface these numbers look great. Will the rents go up over time, or is this area pretty static? Is this a solid area, or is a bit sketchy? These are all things I would think about. Also, what is the mechanical setup of the building? Owner paid heat or tenant paid heat? 1 hot water heater (owner paid) or tenant paid (4 hot water heaters). 

As for the HELOC, that is exactly how I got started. My wife and I pulled a HELOC on our primary to help fund the down payment on our first four unit in Lyons, IL. We then were able to BRRR the property and get most of our cash back out seven months later through a refinance on our new four unit. We still own the property, and it is a nice cash flowing asset.